QIWI plc
Q1 2020 Earnings Call Transcript

Published: 20 May 2020

[Operator:]

Good day everyone and welcome to the Qiwi's First Quarter 2020 Earnings Conference Call. Today's call is being recorded.At this time, I would like to turn the call over to Varvara Kiseleva, Interim Chief Financial Officer of Qiwi. Please go ahead.

[Varvara Kiseleva:]

Thank you, operator, and good morning everyone. Welcome to the Qiwi's first quarter earnings call. I am Varvara Kiseleva, Interim Chief Financial Officer, and with me today are Boris Kim, our Chief Executive Officer; and Andrey Protopopov, Chief Executive Officer of the Payment Services segment.A replay of this call will be available until Wednesday, June 3, 2020. Access information for the replay is listed in today's earnings press release, which is available on our Investor Relations website at investor.qiwi.com. For those listening to the replay, this call was held and recorded on May 20, 2020.Before we begin, I would like to remind everyone that this call may contain forward-looking statements as they are defined under the Private Securities Litigation Reform Act of 1995. These forward-looking statements about our expectations for future performance are subject to known and unknown risks and uncertainties.Qiwi cautions that these statements are not guarantees of future performance. All forward-looking statements made today reflect our current expectations only, and we undertake no obligation to update any statements to reflect the events that occur after this call.Please refer to the Company's most recent annual report on Form 20-F filed with the Securities and Exchange Commission for factors that could cause our actual results to differ materially from any forward-looking statements.During today's call, management will provide certain information that will consider non-IFRS financial measures, such as adjusted net revenue, adjusted EBITDA, adjusted net profit and adjusted net profit per share. Reconciliations to IFRS measures and certain additional information are also included in today's earnings press release.With that, we will begin by turning the call over to Boris Kim, our Chief Executive Officer.

[Boris Kim:]

Thank you, Varvara, and good morning everyone. Thanks for joining us today. Today, I would like to share our first quarter 2020 financial results with you. This quarter we demonstrated robust performance even at the end of March we have already started to see the negative impact of the COVID-19 and global lockdown on some of our segments and category. It is fair to say that many of our key niches are impacted by the current crisis. For example, our payments services for betting merchants are affected by the suspension of the major sports events. Also, this project is under pressure from the general downturn in Russia, whilst Tochka is affected by the correspondent significant decline in the SME activity.Many categories like payment services for online games and projects like Factoring and Flocktory show guidance in these troubling times and demonstrate steady growth trends. Despite the global challenges all of us are facing now, we believe that our performance proves the value and irrelevance of the payment ecosystem and digital solutions we have developed so far and aim to develop further. As an omni-channel provider of digital payments and financial services, we were able to continue offering our services to our customers, merchants, and partners info and without any interruption.Moreover, we believe that some of our key categories and niches though negatively affected by the ongoing price maybe well position to show fast and steady recovery as soon as the situation normalizes. At the same time, we continue to focus on optimizing our operations and implementing stricter cost controls across the group. We have prioritized the health and wellbeing of our employees while also supporting our clients and partners within our ecosystem during these challenging times.With the absolute majority of our employees working remotely in mid-March, I am glad to know that our business has continued to operate smoothly because all projects including the plant wind-down of Rocketbank operation. Even though we already began to see the first times of recovery, including the restart of some major national soccer leagues will remain cautious, that's the next couple of quarters will be challenging; however, we believe that we have proved many times before that we have created a resilient ecosystem that is highly adaptive and consumer oriented. We'll continue to develop further by targeting our core niches and areas of expertise and creating new use cases well fitted to serve our users, merchants and partners.Now to some operational and the total net revenue increased by 70% to reach RUB6.3 billion, a RUB5.4 billion in the first quarter of 2019. The increase was mainly driven by payment services and consumer financial services segments net revenue growth. This gross was slightly offset by the technical decrease in Tochka project net revenue. Andrey will discuss the performance of payment service segment in a minute while I will walk you through the results of our other segment.Consumer financial services segments payment volume reach RUB8.8 billion for the first quarter of 2020, increasing by 76% as compared to the same period of the prior year. Segment net revenue was RUB566 million as compared to RUB218 million in the first quarter of the previous year. Our loan portfolio reached over RUB8.5 billion as of March 31, 2020. So, this project has demonstrated strong financial results in the first quarter of 2020 simultaneously increasing the credit portfolio and improving consumer monetization.However, we already see the current price is having a substantial effect on both consumer activity and purchasing power. We have taken all necessary actions to optimize our credit exposure as well as the overall operation of the project. We believe that our efforts are currently sufficient to mitigate key risks and uncertainties. We're actively monitoring the behavior of our clients. As of now we are managing the portfolio and credit limits very tightly, we have taken conservative approach towards our lending business, and we do not see any critical changes in portfolio quality or consumer behavior as of now. We will continue to closely monitor the situation.At the same time, we continue to explore partnership opportunities to support the scaling of the project. We are also developing different strategies aimed at refocusing the project on offering customized products and services to clients in the niches core to our payments services segment. Corporate and other categories segments net revenue which includes primarily Qiwi Bank net revenue of the Tochka project JV, net revenue from accounts receivable, financial and digital bank guarantee products of Flocktory plan project and net revenue of Flocktory SaaS platform awards RUB350 million as compared to RUB476 million in the first quarter of the prior year.The decline was due even by the technical decrease of the Tochka project net revenue offset by contribution of other projects. Further, I would like to give you a brief update on the latest developments in the relation of the Rocketbank wind-down further. In March 2020, the board decided to wind-down a Rocket operation. They have commenced this processed and currently receiving following the initial wind-down plan. As part of the matters, we have terminated marketing activities including the calculation of the Rocketbank loyalty program significantly increases tariffs and are currently reducing the headcount of the project.We have already seen a significant decline in the number of Rocketbank customers as well as corresponding account balances. We believe that the winding down of the current Rocketbank B2C service offering the final loss in the next 3 to 6 months. At the same time, we continue to review the most efficient way to reduce or dispose the Rocketbank assets. We have currently piloting certain projects earlier developed in Rocketbank in our payments segment, particularly as part B2B perceived product pipeline.Finally, yet, importantly, I'm glad to announce that following the determination for the first quarter 2020 financial results and taking into consideration the current level of the uncertainty of our operating environment, our board of directors have improved the dividends of $0.14 per share. We remain committed to the target dividends payout ratio of at least 50% of the adjusted net profit for the 2020 approved by the board in March in 2020.The board of directors reserves the rights to distribute the dividends quarterly as it deems necessary so that the total annual payout is in accordance with the targets provided. However, the payout ratio for each project may vary and be above or below provide the target. Even in these challenging times, we see many opportunities, both in payments space in the adjustment market, and I believe we are very well positioned to continue strengthening our ecosystem with the ultimate goal of securing our long-term growth for us.With this, I will turn the call over to Andrey for an update on the payment services business. Andrey.

[Andrey Protopopov:]

Thank you Boris and good morning everyone. It's my pleasure to be here with you today. Now onto the results our payment services segment, for the first quarter 2020, our payment service segment volume increased by 14% to reach RUB370 million, driven by significant growth in money remittances and e-commerce verticals, which grew 24% and 18% respectively. The growth in the e-commerce and money remittances verticals were largely driven by the development of our key streams including digital entertainment, self-employed, and sharing economy partners.As Boris mentioned earlier in the second half of March, we started to see the impact of the coronavirus crisis on our key payment categories including primarily services for betting merchants. Other categories such as travel and ticketing services we provide to taxi companies and drivers was affected by lockdowns and other restrictions as well.On the other hand, certain categories such as for example online games and physical e-commerce are demonstrating strong growth rate during the lockdown. Generally, we believe that most of our categories such as digital entertainment and to large extend services for the self employed though negatively affected by the crisis may be well positioned to show good recovery rate as soon as the restrictions are lifted.At the same time, certain categories such as for example money remittance remains sensitive to the general level of economic activities and maybe pressured by the decrease of such for the longer period. To put in short, we currently see and we likely continue to see mixed trends across our system. Overall taking into account challenges we are facing due to the lockdown and social distancing, we expect the importance of digital solution and payments will continue to increase in the near future. We are taking this chance to review and strengthen our product pipeline and suite of services we offer and believe that we will be able to find new niches as a result of this crisis.Going back to the first quarter results, payment services segment net revenues increased 10% to reach RUB5.3 billion compared to RUB4.8 billion in the prior year. Payment service, payment adjusted net revenues increased 10% to RUB4.6 billion, up from RUB4.2 billion in the prior year, primarily as a result of net revenue growth, in our money remittance and e-commerce verticals, which grew 11% and 10% respectively.Our financial results were predominantly driven by the volume growth in money remittance and e-commerce categories. Our payment average adjusted net revenue yield was down by 4 basis points year-over-year to 1.27%, driven by the yield decline in e-commerce and money remittance market verticals. The yield decline resulted primarily from scaling of our business which came gradually for offering our merchants and partners the new services, such as online acquiring, such services had lower operations with our Qiwi Wallet solutions.The growth of these new product streams may dilute our payment average adjusted net revenue yield, primarily in the e-commerce category, while the commissions we charge in our core solutions remain stable. Payment service other adjusted net revenue increased 10% to RUB727 million as compared to RUB661 million in the prior year as a result of growth of revenue from fees from inactive accounts and ongoing payment that was in line with overall growth of our ecosystem and interest revenue.As Boris mentioned earlier, our growth was driven by the robust performance we have achieved in our key strategic streams and through the expansion and enhancement of the product proposition reward. Surely at the moment, we see many challenges imposed primarily by the coronavirus crisis and correspondent lockdown worldwide ahead of us.Even though, we're starting to see some of the restrictions are being lifted very main culture, we believe that we are well positioned to continue to grow our business and reach our services development and create a new use cases for our users, merchants and partners. We are doing our best to improve and optimize our operations in order to lay a ground work for the longer term growth.With this, I will pass over to Varvara for more details on the financial performance of the Group. Varvara?

[Varvara Kiseleva:]

Thank you, Andrey. Moving onto expense, this quarter our payment services business continued to demonstrate strong operation performance and generate a substantial cash flow. At the same time, in the end of the first quarter, we have launched certain cost and growth optimization initiatives, including the wind-down Rocketbank operations with the aim to improve the operating efficiency across our key operations segment.This being said, adjusted EBITDA for the first quarter of 2020 decreased 2% to RUB2.3 billion. Adjusted EBITDA margin was 37% compared with 44% from the prior year. Adjusted EBITDA margin expansion primarily resulted from an increase of first new expenses in payment services, segments and corporate and other categories as well as growth of credit loss expenses mainly related to the SOVEST project. This was partially offset by the total adjusted net revenue growth as well as by a decline in rent of premises and related utility expenses as well as advertising, client acquisition and related expenses.Group adjusted net profit increased 6% to RUB1.8 billion from RUB1.7 billion in the first quarter of the prior year. The growth adjusted net profit was primarily driven by the same factors impacting adjusted EBITDA. Net profit was also affected by the following factors. Share gain of an associate and a joint venture as opposed to share of loss of associate and joint venture for the same period in the prior year most related to Tochka JV and net foreign exchange gain as compared to net foreign exchange loss for the same period in the prior year offset by higher income tax expense and other income and expenses, net loss as compared to other income and net expense gain for the same period in the prior year.Payment services segments net profit increased 2% to RUB3.1 billion compared to RUB3 billion in the prior year, driven primarily by the payment services segment as revenue growth offset by the increase of payroll and related factors. Payments services segment net profits increased 2% to RUB3.5 billion compared to RUB3 billion in the prior year, driven primarily by payment services segments net revenue growth, offset by the increase of payroll and related factors excluding effect of share-based payments and foreign exchange loss.Consumer financial services segments net loss was RUB522 million in the first quarter of 2020 as compared to a net loss of RUB532 million in the same period of the prior year, resulting primarily from segment net revenue growth offset by an increase in credit loss expenses. An increase in credit loss expenses was primarily driven by the RUB186 million increase in expected credit loss allowing that was due to the adjustment made to our provisioning models in light of expected operating environment and credit quality deterioration resulting from the global distress caused by COVID-19, falling oil prices and ruble devaluation as well as by the expression of our credit portfolio.Rocketbank segment net loss was RUB660 million, an increase of 35% compared to the net loss of RUB490 million in the prior year, resulting primarily from an increase in payroll including RUB142 million severance payment provisions related to the wind-down process started at the end of the first quarter.Now on to our guidance. Firstly, I would like to remind everyone that at the moment, we have limited visibility regarding the potential impact of the outbreak of the COVID-19 chain of coronavirus from our business including the negative effect on the betting industry in general and revenue generated from products and services we provide to our betting merchants caused by postponement and termination of the major sports events as well as the negative effect on the consumer lending market in Russia and corresponding impact on our SOVEST project.In addition, it is currently unclear how much consumer demand will be negatively affected from the outbreak of COVID-19 and what effect the outbreak will have on the macroeconomic environment, as a whole. The full impact remains uncertain and will depend on the length and severity of the effect of the coronavirus on economic activity in our markets. The full scope of the negative impact that the abrupt decline in oil prices and resulting devaluation of the ruble may have on the Russian economy also remains unclear but has the potential to be very significant.Our outlook reflects our current views and expectations only and is based on the trends we see as of the day of this earnings call. If such trends were to deteriorate further, the impact on our business and operations could be more severe than currently expected. We continue to monitor the situation closely.Having said that, we reiterate our guidance in respect of 2020 outlook, we expect group total net revenue to increase by 3 % to 13% over 2019. Payment services segment net revenue to change by minus 3% to plus 5% over 2019, while adjusted net profit is expected to increase by 10% to 30% over 2020. Although, we see our first quarter results as a solid foundation for the year, certain other factors remain beyond our control and we therefore right to revise guidance in the course of the year.With that, operator, please open up the call for questions.

[Operator:]

Thank you. [Operator instructions] Our first question is from Ulyana Lenvalskaya with UBS. Please proceed.

[Ulyana Lenvalskaya:]

Firstly, is it possible for you to comment on the current trends i.e. April or May so far, if possible with numbers? And if not, can you make maybe just describe the trajectory for payments or for the business altogether?

[Andrey Protopopov:]

Our overall volumes and revenues mainly behind baiting merchants as well as through the, in certain extend self-employed categories likes taxi drivers and some others due to the cancellation of sport events and lockdown. The major dynamics are more or less the same as April.

[Boris Kim:]

Hi, Ulyana, it's Boris here. Yes, I just wanted to make some comments regarding other segments of the business. You know that we are winding down Rocket, so it is -- the process is going well and according to the initial plan. That's nothing new about that. Regarding SOVEST, the data were quite well in the fourth quarter. Now, we see some deterioration in the quality of portfolio and also change in around section behavior of the customer, but we are closely monitoring situation in SOVEST. As for other business units like Flocktory and Factoring today really performed very well in April. Unfortunately, I'm afraid that I can't give you exact figures, but they performed well.

[Ulyana Lenvalskaya:]

And secondly, the sequential decline in the number of active e-wallets for the first time ever. Can you please comment on that other regions?

[Andrey Protopopov:]

We see it's not a decline, it's more like situation number with we said in the past that our key effort is not under number of key -- on the wallet per share, but on the key niches and teams that we’ve developed in digital entertainment and self-employed and talking about those wallets, that is now declined and actually the growth we demonstrated in the third quarter and revenues and volumes in our key categories as behind those niches. So, I would say that overall we’re finding number of wallets.

[Ulyana Lenvalskaya:]

And if I may, another question, what was the net cash position at the end of the quarter?

[Varvara Kiseleva:]

Favorite position. Thank you, Ulyana. Our net cash position was around 30 million to 40 million the same basically as of the end of Q4.

[Ulyana Lenvalskaya:]

And eliminated in dollars, right?

[Varvara Kiseleva:]

The potential part is denominated in dollars, but second part is in rubels.

[Operator:]

Our next question is from Ildar Davletshin with Wood & Company. Please proceed.

[Ildar Davletshin:]

Hi everyone. Thank you for the opportunity to ask the question. So, could I ask, what was your revenue growth in January and February of this year, particularly in the payment segment before March? So that would be my first question. And that would also like understand two more things. So, your margins have declined quite substantially and you've mentioned additional personnel costs. I'd like to understand if you could the -- maybe the numerical part like what was the degree of this extra course and then more like what's the nature? Is it like bonuses to last related to prior year activity and how much of it is the one-off in nature? So that would be my second question. And then the third would be in general, like now that you've seen kind of the new reality, and you mentioned you are looking at niches like what'd you think would be the most interesting opportunities, have you identified them already apart from batching, which was a big driver for you? So anything that say, when the life goes back to normal, you could say that there is, I don't know 10, 20 like a substantial percent of your revenue coming from new services that you developed during this crisis. Thank you.

[Operator:]

Our next question is from Chris Kennedy…

[Varvara Kiseleva:]

I am sorry. We're answering the question too.

[Boris Kim:]

Yes, we are still answering question.

[Operator:]

I'm sorry.

[Boris Kim:]

Just a quick answer to your question regarding first two months of the first quarter, the group results are as far as plus 17 in net revenue and plus 30 in net profit compared to first months of 2019. And Andrey will comment the other question.

[Andrey Protopopov:]

Yes. So, on the payment services, the growth was more or less the same that in the total because in the March we had a mix effect of like, I would say, kind of speed up of the growth before lockdown started, so we saw kind of mix effect in the March. So, I would say that in total you can think more or less the same growth number for the January, February for the payment services segment.

[Varvara Kiseleva:]

On the marginality that our comments and to sum up a little bit the answer for the previous question, I would say that we started to see the crises only in the very end of March. So, the growth rate that's demonstrated in the first quarter are representative for mostly of the fair prices gross level. On the marginality in the first quarter payment services, that's primarily relates -- the growth primarily relates to the [LTI] program that. We haven't used in August of 2019.So, if you're looking on the first quarter 2020 versus first quarter 2019, there this program is not -- was present in the first quarter of 2019. The size for the numerical value is roughly about 100 million that's not a one-off. That's the program that we have introduced and it will continue going forward and for long-term incentive program for open middle management. I hope this answers your question. For the new niches, about the new niches then we’ll postpones to Andrey speak about it.

[Andrey Protopopov:]

I just found that number for January, February, it's actually several percent higher than the quarter I would say, but that's the several percent high of the growth rate. And for the new niches, I would say that we generally keep our focus on what we were talking previously. First one was the digital entertainment and we believe that overall the only category within digital entertainment that is heavily effected is for the merchants and it's the temporary effect. So, in the future, it should be back to the normal situation and we expect it to happen sooner in the quarter.Secondly, and I think we had now even more opportunities in this area is related to the self-employed business, businesses that are self employed, both the payout to the self employed by the different companies and as well the self-employed of the new economics and new niches that actually developed. So, the current situation again after the lockdown is lifted, we believe we will simulate actually more part of the economics move to the self-employed part.So more companies will be trying to attract other self-employed versus the permanent workers, at the same time with people that are currently losing their job or the income, they'll be looking for the different type of self-employment including new niches. And all this at the same time, we'll delete to the different type of digital communications businesses et cetera, and this is exactly the area where we are playing. So, kind of looking more midterm, I would say, we see the potential there to continue develop our business regarding the self employed.

[Operator:]

Our next question is from Chris Kennedy with William Blair. You may proceed.

[Chris Kennedy:]

I just wanted to dig more into SOVEST and if you can talk about kind of the pathway to becoming breakeven by year end that's still in the cards? Thank you.

[Boris Kim:]

Thank you, Chris. So, we -- indeed, we plan to reach a breakeven by the end of this year in SOVEST, but the application has changed. And as I mentioned before, we see the duration of the portfolio itself and as you may have noticed and noticed that we created a special reserve in the first quarter for the portfolio, but the problem not only in portfolio itself and cost of risk. The problem is also in revenue side because the clarity of business model of service is that we get main revenues not from interest, but from a transactional behavior of our customer.And what we see now is the number of transactions and what the payment volume decreased because of two reasons. The service is mainly offline payment vehicle and due to lockdown, we lost a lot of a retail point of sales in offline. And second service operates in so called traditional segment, which is the new the consequence of price on which much high then in say digital entertainment segment in which Qiwi Wallet is active. So, at the moment, we don't foresee the possibility of breakeven for service this year, but we closely monitor situation for us. And then, we -- and second we look -- we are looking for different options to continue SOVEST operations including partnership with [indiscernible].

[Operator:]

Our next question is from Andrey Pavlov-Rusinov with Goldman Sachs. Please proceed.

[Andrey Pavlov-Rusinov:]

I've got a couple of questions. Maybe first of all just want to start with a little bit of a follow-up on SOVEST. So, basically, I see that the net yield actually increased in the first quarter. So could you please elaborate on what's driving that? Is it basically declining volume that kind of included the share of interest or anything else? And also maybe what was actually the cost of risk on your portfolio in the first quarter? And what was the part which was forward looking versus the part that related to deterioration? And also what should we expect that in the coming quarters? I guess the second quarter should be challenging there. So, that's my first question and then I ask the following one after.

[Varvara Kiseleva:]

Andrey, hello. Thank you for your question. First of all on net revenue yield of service that’s mainly related to. If you look at the press release, you can see that the volume showed pretty significant growth as compared to last year, and the key reason for the increase in yield is better monetization. So as you know we -- part of our service include selling value-added options for our customers, including opportunities to wide prolonged entitlement to shop outside of the partner network et cetera. So, the penetrations of these options are increased and this last to [indiscernible] of the consumer base, that’s for the net revenue.On fourth, so for the first quarter as we said, we don’t see any significant -- in the first quarter, we didn’t see any significant I'd say signs of negative dynamics. The core was in accordance with the previous year so around 10% to 12% on average. And the reserve that we -- the reserve allowances that we booked in this quarter, which are related to the restructuring programs introduced by the government. And with the overall decreasing quality of the macroeconomic and operational environment, this was roughly, if I’m not mistaken around RUB180 million.So, that are connected to the event basically happens what we call after the reporting date. So that's how we account for the deteriorating environment in April and May. As for core, we definitely expect the core will increase slightly where, as Boris said, monitoring the situation on a daily basis, both in terms of cost of risk and how the customers are repaying their current loans, their current debt. And of course, if we see any deterioration we're immediately taking actions that how fast curve potentially reach.

[Andrey Pavlov-Rusinov:]

Thanks and if I may clarify, this revenue yield, do you think it’s going to be sustainable in the coming quarters although the volume yes would decline in the second quarter?

[Varvara Kiseleva:]

So, we see quite a strong effect from the working operating environments, again, as Boris mentioned, because people shop less and the availability of funds is basically less. So, we believe that both payment volume and likely the yield -- and the yields are likely to decline in the second quarter.

[Andrey Pavlov-Rusinov:]

Thanks. That's clear, and just a couple of other questions. Just maybe could you elaborate on what you see in there money remittances in April and May, and basically, as Andrey mentioned, that you may expect this to recover slower given that it's kind of related to the overall economic environment. So, what's your current view there? And maybe, if you could also break it down between the closed border payments of self-employed and other sub-segment there would be very helpful? And just the final question, you mentioned about the some cost initiatives in the payment. So, should we expect basically the growth rates in payment cost to subside significantly from the second quarter? Or would that be very gradual dynamics? That's it for me.

[Andrey Protopopov:]

Yes. So, thank you, Andrey, for the money remittance part. We see mix dynamics, I would say. So, the biggest decline of jobs in April and May is related to the self-employed fees where those decreased with the most rates. At the same time, both are the categories where we believe, we will see the growth as soon as limitations will be lifted and we see potential there.For the more like classical money remittance and some remittance between wallet and from the wallet to the card and bank accounts. There volumes are not affected that much, but at the same time we expect the negative dynamic will be longer because it will be more related to the overall market situation rather than with the lockdown percent.So, currently as I said, the bigger decline is in the self-employed piece of the money remittance. For the future, we will see more longer effect for the classical money remittance and from the wallet to the bank cards accounts. For the cost part of your question and the payment services segments, there will be gradual effect quarter-by-quarter we will see gradually. So, we already made some measures actually in the first quarter and we continue with more roughly I would say in the second quarter, so we will be seeing in the next quarter.

[Operator:]

[Operator Instructions] Our next question is from Maria Sukhanova with BCS Global Markets. Please proceed.

[Maria Sukhanova:]

Yes. Good afternoon. I have two questions. The first one on your guidance, how comfortable are you with the way it is? So, I understand the lot of moving parts, but would you say that, so far a situation develops? And why does your worst case scenario or like you see some downside to that? And also within the guidance question, do you expect second quarter to be the weakest within the year or you think or first quarter will be weak as well? And second question with dividends. Understand the payout would vary throughout the year, but you've ever been developed as you expect? Would it be fair for us to expect the dividend absolute amount will increase in the next quarter? That's it for me.

[Varvara Kiseleva:]

So, for the guidance, of course, we're comfortable with it. That's why we reiterated. So currently, the situation does develop in accordance with the forecasts and expectations that we had in the end of March when we were providing the guidance first. So, nothing has changed materially as of now in our expectations as to significantly alter our expectations about the performance for the full-year.After the core dynamics, we do expect that the second quarter is likely to be weakest. However, the distribution between second and third quarter, the growth rate in between second and third quarter kind of can vary based on when and to what extent the limitations are lifted. The sports events are dead and the process with a couple of other internal processes.So, in this regard, we can expect the second quarter -- the second quarter will be weakest, but we're still quite, I would say, we will not -- we never provided this quarterly guidance and we will not prefer not to go into many details for the quarterly split as of now.On the dividends as you know, the Board of Directors have a place to payout ratio of 50% at least 60% of the adjusted net profit group, but the annual payout that we're aiming for it. And the quarterly numbers will vary in accordance with that. And as you know, we approve dividends quarterly, the Board of Directors approved dividends on a quarterly basis. So I would prefer not to comment on the dynamics as of now.

[Operator:]

Our next question is from Vladimir Bespalov with VTB Capital. Please proceed.

[Vladimir Bespalov:]

My first question is, could you elaborate a little bit on the over a yield that we was in money remittance vertical in the first quarter? What was behind that competitive pressure, the changes in volume? And how -- given what you see in terms of volumes in the second quarter, how this is going to develop? Then my second question would be on your bottom line guidance, given that service is going to perform much worse than probably you initially expected and Tochka will be under pressure. So, what are probably the sources of positive surprises maybe, that allowed you to leave your full-year guidance unchanged? And the third one, sorry if I missed it because there were some problems in my lines. But could you elaborate a little bit on the betting volumes in April and May, how big was the decline of betting volumes? Thank you.

[Andrey Protopopov:]

Thank you. Thank you for your question. For that I will take the first and the third one. For the money remittance, first quarter yield, the main changes in the yield are due to the difference product dynamic within the category. So, the higher growth rate in the money remittance in the third quarter versus last year in the self-employed, payout self-employed with the self-employed like the taxi companies and some other similar categories where yields are lower versus for examples wallet payments from the wallets to other bank card accounts. So overall, I would say that the mix within the category was changing behind this growth rate and lower margin by high growth categories.Overall, at the same time within the same product, there is no significant changes in the yield. For your third question regarding the betting volumes decreased in the April and May. Yes, we of course observe for the sudden decrease around 25% to 30%. But at the same time, I would say, it's stabilized in the mid-April, and we are more or less stable trend since then on this volume. We have, I would say, moderate optimism looking forward as soon as some of the sports events already started, you know, probably the Bundesliga restarted this weekend. We saw some I would say pick up, so we will continue to monitor other sport events and the volumes recovery going forward.

[Varvara Kiseleva:]

And for your second question on the bottom line guidance, so, as you know, Vladimir, in 2019, the investments that we made in Rocketbank and SOVEST were pretty significant. We expect that, however, the total investments in these two projects for this year will be below those that we have seen in 2019. And our overall cost optimization both across the projects of the group and to certain extent in the payment services would contribute primarily to the positive dynamic of the group adjusted net profit.

[Vladimir Bespalov:]

Thank you very much. And can I clarify with Andrey one more thing? Given you've said about the pressure on the yields in money remittance and on the trends that we see in the second quarter. I would assume that yield could actually increase because self-employed are not performing well in the second quarter. Is this still a right way to look at the situation?

[Andrey Protopopov:]

I would say it's too early to say, but the changes might happen mainly due to mix change in this period. So, yes, it may increase if the mix will be positive. But, I mean, overall, it will not be very good because it will be related to the decrease of the volume in some categories more than the others.

[Operator:]

Thank you and this does conclude today's conference. You may disconnect your lines at this time and thank you for your participation.